For seven years, Pinterest has been considered a “unicorn,” boasting a valuation larger than $1 billion since its 2012 successions C funding circular. Before that, it was considered an underdog, puzzling some investors with its “digital pinboard” and decision for “standard growth.”
Now, as the company takes its final stride toward its Thursday NYSE initial public gifting
, it’s being named
Pinterest plans to vend shares of its stock, titled “PINS,” at $15 to $17 apiece, less than the roughly $21 per share it charged independent marketplace investors to participate in its mid-2017 successions H, its last independent financing. That IPO price translates into a mid-range valuation of $10.64 billion, or nearly $2 billion under the $12.3 billion valuation it garnered after its last circular, hence “undercorn.”
There are many potential causes to a down circular like this. In the case of Pinterest, it’s probably less a result of newly public Lyft’s poor performance on the stock marketplace and more a result of its own reputation for sedate growth. Pinterest is a disciplined company that’s carved a clear route to profitability. It has invested a lot of moment and power into construction a positive, different culture and a product devoid of trolls and hate speech — moment some believe should have been spent focused on rapid growth and scale.
Sure, if Pinterest had tossed its values aside and blitzscaled, maybe it would debut with a larger initial marketplace cap, but its corporate culture will be key to its long-term value, and investors are going to get rich off its IPO either route. So Pinterest is an undercorn — who cares?
Pinterest isn’t too nice
Founded in 2010, Pinterest is one of the youngest members of the newly dubbed “A-PLUS” cohort of unicorns, made up of Airbnb, Pinterest, Lyft, Uber and Slack. Compared to its peers, Pinterest has raised a modest $1.47 billion in equity funding from Bessemer quest Partners, which holds a 13.1 percent pre-IPO stake, FirstMark Capital (9.8 percent), Andreessen Horowitz (9.6 percent), Fidelity Investments (7.1 percent) and Valiant Capital Partners (6 percent), according to the company’s IPO filing.
Today, Pinterest counts more than 250 million monthly active users, despite a company culture that many have said has slowed progress. Co-founder and king executive officer Ben Silbermann, as The brand-new York Times pointed out in a recent profile, is not your typical unicorn CEO. He has refused to adopt the move swift and break things mentality, shied away from the press and focused on “standard growth” and a supportive company culture.
Even with Pinterest’s brand-new status as an undercorn, Bessemer still owns a stake worth upwards of $1 billion. At a midpoint price, FirstMark and a16z’s shares will be worth about $700 million each. Pinterest employees may be too nice to make decisions as quick as other unicorns, as is the bay in CNBC’s recent piece on the company, but the company wouldn’t be where it is today if it completely lacked a “strategic direction.”
“Being nice and having core values and making decisions with intent is to their overall merit,” Eric Kim, the co-founder of consumer tech investment compact Goodwater Capital, told TechCrunch. “They’ve done an incredible job at being very disciplined with a focus on top lines.”
More often than not, businesses accrue value at IPO. Look at Zoom, for instance; the under-the-radar video conferencing business is expected to increase its valuation nine times over in its IPO, expected tomorrow.
It’s a disappointment to late-stage investors when the opposite happens for one obvious reason: They may not see a return on their investment. If Pinterest indeed becomes an undercorn this week, its newer investors, those that participated in its successions H, may have to hold on to their stock longer than planned in hopes its value climbs over moment. That, right there, is the worst thing about being an undercorn. These titles are otherwise just nonsense.
Pinterest’s valuation has long radically exceeded its revenues — a factor that surely paved the route for a down circular — yet it was touted as a tech marvel, a unicorn among unicorns. In recent years, its valuation has swelled from $4.75 billion in 2014 to $10.47 billion in 2015 to, finally, $12.3 billion in 2017. Meanwhile, Pinterest posted revenues of $299 million in 2016, $473 million in 2017 and $756 million in 2018. There’s no denying the company’s clear route to profitability, as its losses are shrinking year-over-year while profits grow, but 2018’s revenues are still 16 times less than Pinterest’s “decacorn” valuation.
Silicon Valley has a tendency to over-value unprofitable consumer-facing businesses; Pinterest’s down circular IPO could be a sign of Wall roadway’s reckoning with Silicon Valley’s vanity metrics. Pinterest, however, isn’t the first unicorn to take a knocked
to its valuation at IPO. Both Box, the cloud-based content management platform, and payments company Square were undercorns when they went public, for instance. Square has since thrived as a public company, while Box is currently trading around its initial share price.
“The recovery is all about execution as a public company when everything is much more transparent,” Monique Skruzny, CEO of InspIR team, an advisory compact focused on investor relations, told TechCrunch. “The IPO is the beginning of a company’s long-term relationship with the public markets and the public markets have to make cash. Going public at a valuation that may not necessarily be what some might think or consider to be the top leaves room for upside going forward.”
For Pinterest, continuing to cut losses and surpassing $1 billion in revenue this year is key. Given its history, financial metrics and the generally favorable marketplace conditions, it looks poised to make that happen.
The bottom line is Pinterest, given its sedate growth and inflated valuation, was probably always doomed to be nicknamed an undercorn. Its culture, however, shouldn’t be to blame for its brand-new status. After all, a $10 billion IPO is something for the tech industry to be proud of, not to criticize.
In the words of former investor and Evernote co-founder Phil Libin, who joined me on the Equity podcast last week to talk IPOs: “Who would criticize a company who sacrifices growth because they have important culture? Losers, honestly.”
“If they didn’t have the culture and the people they wouldn’t have made anything,” he added.